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CMA CGM moves closer to NOL takeover with exclusivity agreement

CMA CGM moves closer to NOL takeover with exclusivity agreement
The takeover Neptune Orient Lines (NOL) by CMA CGM moved a major step closer at the weekend with the two companies entering into an exclusivity agreement.

NOL told the Singapore Exchange that its majority shareholder, Lentor Investments, a subsidiary of Temasek Holdings, had entered in the exclusivity agreement by way of a pre-conditional voluntary general offer. Under the agreement CMA CGM has until the end of 7 December to complete due diligence on NOL and negotiate definitive agreements on the offer.

In a statement on Sunday CMA CGM said: “Should these discussions lead to an agreement, such a combination would contribute to the consolidation of the container shipping industry, at a time when scale is more critical than ever.

“It would further reinforce CMA CGM as a global force in container shipping, leveraging the strong geographic and operational complementarity of both groups.”

NOL noted there was no assurance that negotiations would result in an agreement or a transaction.

The other company that has been looking at buying NOL is Maersk Line.

The move by CMA CGM comes despite negative views from analysts and industry observers on the value of purchasing NOL, especially in the current market.

After interest from CMA CGM and Maersk was announced analyst Alphaliner commented “significant obstacles” remained to the sale, in particular in relation to the valuation of the Singapore-headquartered company.

Last week Tribini Capital director Thomas Soderberg said at a conference in Hong Kong: “I think that anybody in their right mind would not go and buy a loss-leading liner side today.”

It is not yet clear how CMA CGM would integrate NOL should a sale go ahead. In other more regional acquisitions such as Delmas, ANL and CNC Line the French company has maintained distinct brands and organisations.

This is in contrast to potential rival bidder Maersk Line which has subsumed brands its has acquired such as P&O Nedlloyd and Sea-Land, although the latter name has been more recently resurrected in the Americas.